How to Plan for Early Retirement

You may not have any plans to retire early, but bear with me. Life is one of the most uncertain activities we participate in.  We do not have control over our future and things can happen quite unexpectedly. In the sprit of that old saying, expect the best but plan for the worst, planning for an early retirement will stand you in good stead either way.

Many folks approaching retirement age who are in good health and are active have no plans to retire completely.  They want to remain active and engaged till the last moment of their lives.  However, that may not always be possible.

If you do have a desire to retire early, plan for the issues that will necessarily arise.  If you were to retire before age 65, you won’t qualify for Medicare.  So, healthcare coverage should be high on your list of financial provisions. 53 percent of early retirees polled said they left the workforce ahead of schedule due to health issues. 

“Even younger people who have good health habits can experience an unexpected health issue and be forced to take an early retirement,” says Darren Nomberg, Senior VP of Investments for David Lerner Associates. The problem is health issues are rarely predictable.  They tend to happen suddenly and catch us off-guard. According to a Fidelity study, a couple is likely to spend $300,000 on healthcare after retirement. Without Medicare this would be quite the challenge.

Study predictions about the economy so that you have some predictability. Your nest egg is going to have to last a lot longer if you retire early. Inflation, recession, and other financial ups and downs can eat away the purchasing power of your savings.

Tips for Saving for Early Retirement

• You will need to plan your budget carefully. Calculate how much you’ll need and for how long.  Use this retirement calculator to assist you.
• Decide on living space and location. Plan for the best type of home for an early retirement lifestyle.
• Although it might not be possible to predict with accuracy, plan for an age when you will retire and plan accordingly. Look at what suits your planned retirement activities and budget.
• Plan when you will take Social Security and figure out how to cover the gap before that kicks in. A 401K or IRA could allow you to wait till full retirement age, so you get the most possible from Social Security.

So, whether it’s something you actively plan for so that you can spend more years traveling and doing the things you love or you find yourself in early retirement due to some unexpected circumstance, it’s wise to plan for it. That way you’re in good shape either way.

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.